Don't Get Lured Into A Deal That's Too Good

These two boat-buying deals seemed fine at first, but then something did seem a little fishy. Here are two cautionary tales, so the same never happens to you.

Two marine surveyors recently reported to BoatUS that clients of theirs had been duped by the same online boat-buying scam. In both cases, the would-be buyers paid $22,000 to a bogus escrow company for boats that didn't exist. In retrospect, red flags and the distinct odor of rotten fish marked every aspect of both deals described by the surveyors. But, said one of the scam victims, a New York man who hoped to share the joys of fishing and boating with his young child, "I wanted to believe [the deal] was a great way to buy a boat. I ignored the warning signs."

In the first case, the New York buyer found a 2005 Hydra-Sports 2400 for sale in Pacifica, California, on one of the major online boat-listing sites. He looked at pictures posted on the photo-sharing site Photobucket and had several phone conversations and exchanged e-mail with a Seattle man who purported to be the seller. "The seller sounded like he was at least 55 years old and had an Eastern European accent. He told me he owned a diner in Pacifica and had just bought another one in Seattle," the buyer said. "The asking price was $22,000, much less than what the same model was selling for elsewhere."

The BoatUS Value Check service places fair market value for the 2005 Hydra-Sports 2400 at $35,000 to $38,000. According to the buyer, "When I asked about the low price, the seller said the boat had been given to him as a wedding present, so how much he sold it for wasn't very important."

The buyer hired a marine surveyor and a mechanic to inspect the boat and its Yamaha engine. The seller suggested two locations for the sea trial, both of which turned out to be reservoirs that didn't allow powerboats.

"Fishy! Bells and whistles went off!" the Alameda surveyor told BoatUS, because the seller of the boat claimed to be very familiar with the area. "I told my client to be especially careful about turning over money to the seller. However, the buyer informed me that the money would be held by an escrow company pending the sale," the surveyor said. "He thought he was being careful."

The marine mechanic hired to inspect the Yamaha engine asked the seller for model information, so that he could check service records. Immediately, another red flag went up because the seller "hemmed and hawed," according to the New York buyer, and eventually said he didn't have his ownership papers handy. At this point, both the surveyor and the mechanic cautioned the buyer that details of the sale just didn't add up. But the New York buyer admits he ignored their warnings. "There were things I should've seen, but they just didn't register. I filled in the pieces myself to make things work."

The buyer said the seller steered him to place payment for the boat with an online escrow company called AOL Money & Finance. "Everything was about the escrow," the buyer said. "The seller told me AOL Money & Finance was like PayPal, so I assumed it was legit and wire-transferred the money. I trusted the company because it mentioned AOL." AOL offers information and news about financial matters on its site, but does not provide an escrow service or any other money-handling service.

On the day the boat and engine inspections were scheduled to take place, the surveyor and mechanic arrived at the agreed-upon place in Eddo's Harbor in the California Delta. "We hung out for an hour," said the surveyor. "No boat." By this time, the buyer had transferred the entire $22,000 to AOL Money & Finance. He said it was not until later that he realized the receiving account wasn't with AOL Money & Finance, but a bank in Georgia. He says the bank account was in the name of a company called US Export LLC and, by the next day, the account was empty. The buyer's bank told him they couldn't recover the funds. The Georgia Secretary of State's Corporations Division has no active records for the company.

A One-Two Punch

On the heels of the New York report came a second one involving a boat purported to be located in Tennessee. Recalls the surveyor, "I was contacted by a fellow in Ontario to do a pre-purchase survey on a 2006 Pro-Line 24 Super Sport that was supposed to be at the seller's home here in the Chattanooga area. The seller said he was in Seattle and, after some discussion, said he'd fly back to show me the boat. The evening before the survey, neither my client nor I can contact 'Mr. seller.' I found a local phone number for the address where the boat was supposed to be and the man who answered said there was no boat for sale there. My client and I agreed there was something fishy." The surveyor said his client had already wire-transferred $22,000 to an escrow company recommended by the seller.

"The money transaction was set up via e-mail from a source called AOL Money & Finance," the buyer said. "The process was for me to wire-transfer funds that would be held in a secure investment account. This transaction took place through BB&T Bank in Lithia Springs, Georgia. The system that the 'seller' has in place and the correspondence that we were sent looked legitimate, and I still can't believe I got caught in this," the Ontario buyer said.

Both buyer-victims said that, once their money was wire-transferred, they were unable to contact the seller again. When BoatUS began to look into these complaints, we found a listing for AOL Money & Finance on the Better Business Bureau's Web site. The listing includes a Miami Beach postal address, which appears to be in a residential neighborhood of two-story attached houses, and a Web site address that the New York buyer said differed from the one he used. As our research continued, we found that the AOL Money & Finance URL changed at least twice over the course of several weeks. The company isn't listed in Florida business records, nor does it appear to be licensed, as required by state law.

The various AOL Money & Finance Web sites contained no physical address, nor did they provide a telephone number for direct contact. They did, however, provide an e-mail link for communicating with the company.

Safe Steps

Placing deposit money or the full purchase amount in escrow is clearly the smart thing to do when making a major purchase. But, the experiences of the buyers in New York and Ontario demonstrate that all escrow accounts are not created equal. Doing business with a known company is step one. Your bank may be able to help with an escrow account. The BoatUS Settlement Service is another option specifically geared to transactions involving recreational vessels. The fee for the full settlement process is $600.

The BoatUS Settlement Service verifies the seller's ownership information, holds the deposit check, and helps arrange for the final payment to the seller — all of which would've protected both buyers in the AOL Money & Finance scam. The scammer-seller would probably not have been able to produce documentation showing he owned either boat.

Hiring a marine surveyor to inspect a used boat, especially one that's being sold long-distance, is essential. Never buy a boat sight-unseen based on the seller's description, and never rely upon a surveyor recommended by the seller. The BoatUS Surveyor Referral Service is a good source for independent experts.

Due to the poor economy, boat buyers have a broad selection to choose from. Buying a long-distance bargain can come at a price — not the least of which is the cost of transporting the vessel across country.

Law Enforcement

The Internet Crime Complaint Center (IC3) is a partnership between the FBI and the National White Collar Crime Center, a nonprofit membership organization that focuses on economic and high-tech crime. It serves as a means to receive Internet-related criminal complaints. Escrow services fraud is listed by the IC3 as one of the most common web crimes. The IC3 provides the following tips:

• Always type in the Web site address yourself rather than clicking on a link provided. For example, clicking on the link for AOL Money & Finance brought the searcher to an address that was slightly different than the one in the link.
• A legitimate Web site will be unique and will not duplicate the work of other companies.
• Be cautious when a site requests payment to an "agent" instead of a corporate entity. Both victims in the AOL Money & Finance scam saw the transfer-to accounts were different.
• Be leery of escrow sites that only accept wire transfers or e-currency. The AOL Money & Finance site said it accepted credit-card payments only for transactions of $5,000 or less and that transactions above this amount had to be made by wire transfer. Credit card companies have mechanisms for placing stop-payments on disputed amounts and there are limits on cardholders' liability for fraudulent charges. In contrast, wire transfers typically move money from one bank account to another and can't be reversed without authorization by the holder of the account that receives the funds.
• Be watchful of spelling errors, grammar problems, or inconsistent information.
• Beware of sites that have escrow fees that are unreasonably low. Consumers can expect to pay from $500 to $1,000 in escrow fees. The amount may depend on the value of the transaction.